The Fed held with two officials voting to hike and Warsh calling inflation too high, then Williams said he sees no need for a 2027 hike. Chips lifted stocks and the two-year rallied, but the curve still prices hikes the committee's centre may not deliver.
Three things
- The Fed is split, and the split is now public. Two officials dissented for a hike while Williams said he currently sees no need to hike in 2027.
- The rally was narrow. Chips carried the cap-weighted index while only 49% of S&P 500 members rose, so this is a spread to trade, not a direction to chase.
- Credit's riskiest bonds are cracking while the index stays calm. The fundamentals desk has the gap between CCC-rated and BB-rated high yield at its 91.3rd percentile, the weakest borrowers repricing before the index notices.
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Cambridge Sigma Daily, written after the US close. For information only; not investment advice.